A problem shared... by Judy Hirst

16 Feb 06
& is a problem halved. But not when public bodies can't agree on the best ways to collaborate. Judy Hirst explains why sharing services is so hard to do

17 February 2006

... is a problem halved. But not when public bodies can't agree on the best ways to collaborate. Judy Hirst explains why sharing services is so hard to do

Every parent with a small child knows the routine. It's little Johnny's first day at nursery, and he's found a shiny new toy to play with. There's just one problem another tiny tot wants it too. 'Why not share?' you naively suggest. 'Shan't! Won't! It's mine!' is the predictable response. The result? Generalised chaos and uncontrollable wailing, until a timely intervention by the teacher forces everyone to compromise and calm down.

It doesn't get much better a few years down the line. The kids are still gouging each others eyes out, only this time it's over grown-up playthings like iPods, mobiles and DVDs. Learning to share, that hallmark of civilised adult behaviour, seems to be a hard life-skill to acquire.

Nowhere is this more obvious than in the supposedly grown-up world of public services. For longer than ministers care to remember, they have been exhorting and increasingly instructing government bodies to stop being so proprietorial, and find ways to share services such as payroll, benefits, IT, finance, human resources and other corporate and transactional functions.

The Cabinet Office, the Office of the Deputy Prime Minister, the Office of Government Commerce and the Treasury are all calling, ever more insistently, for shared back-office services across central and local government. Sir Peter Gershon identified this as one of the most important ways to make the £21.5bn savings called for in his 2004 efficiency review. Pooled resources and a new spirit of public service co-operation are key to the IT-enabled 'Transformational Government' strategy outlined by the Cabinet Office last November. It was penned by the new head of Number 10's Delivery Unit, Ian Watmore, with personal blessing from the PM.

The benefits of a bit more give and take are obvious, say ministers. Less wasteful duplication; shared service centres offering vast economies of scale; seamless working across government departments and between local authorities; cashable savings that can go to the front line (a Gershon must-have); more 'citizen-centric' services. The Cabinet Office's shared services advisory group estimates that £40bn worth of efficiency savings could be delivered over the next decade if shared services were implemented 'optimally'.

As David Myers, director of shared services in the Prime Minister's Delivery Unit, puts it: 'It's big, but not that clever. It's about looking at things holistically, and giving something up to get something back. That's not exactly rocket science.' Yet when it comes to sharing, it seems that most public bodies are somewhere at the pre-kindergarten stage still stuck in their silos clutching 'bespoke' services, sulking if not actually throwing their toys out of the pram.

Of course, there are the exceptional high-achievers (aren't there always?); those 'early implementers', pathfinders and other goody two-shoes who have got the whole thing off pat from day one. These model pupils are regularly paraded at efficiency and e-government events, while everyone else shuffles about and looks at their shoes.

An e-government partnership in Hampshire and the Isle of Wight; Blackburn with Darwen's strategic partnership; the Anglia revenues and benefits partnership; Westminster's 'civic watch' initiative; shared service centres in Coventry and Cumbria. These and other cases of good practice, using SMS texting, smartcards and other gizmos, are undoubtedly shining examples to us all.

But the broader picture is rather less impressive. Karen Cherrett, a senior executive with the Public Private Partnerships Programme (4Ps), the local government procurement agency, says there is a lot of talk about the 'wonderful efficiencies' local authorities are predicting from shared services, but: 'It's hard to pin down where it's actually happening. There's not a lot going on yet.' A recent 4Ps report found that, despite a two-year ODPM programme on strategic partnering, the level of take-up by councils has been relatively low particularly when it comes to corporate and transactional services.

'Many strategic partnerships have collapsed it's not a good omen,' says Cherrett. 'What service-sharing there is tends to be in the front office, or in small pockets of specific service lines. There are complex leadership issues at local government level, and getting back-office safe havens like HR, finance and IT to flex their structures is not going to be easy.'

Many local authorities are looking for more of a lead from central government to help kick-start the process. But although Cherrett notes a new sense of urgency, particularly from the Cabinet Office, when it comes to sharing services it seems that Whitehall has a few problems of its own.

Numerous directives, taskforces, tool kits and strategy documents have been pouring out from the highest echelons of government, with visionary, transformative plans to break down central and local government boundaries, link up primary care trusts with councils, fire and police authorities, and much more.

But when the Cabinet Office, Treasury and ODPM attempted to lead from the front last year by launching 'Whitehall One' a shared service centre for human resources they had to abandon the plans at the last minute, because the potential unit cost savings were too small.

One industry insider told Public Finance: 'The whole thing was very aspirational and too small scale. They realised it might not be the best advert for shared services.' OGC chief executive John Oughton confirmed last week that it was his department's review team that pulled the plug.

The project is being revamped, and a 'vision for Whitehall Two' is due to be launched at the end of this month. This, according to Myers, will potentially include ten joinees sharing HR, finance and IT functions, with procurement to follow. But things are still at the 'concept liability' stage, he says, so don't expect too much too soon.

Frustration at the slow progress on shared services is beginning to show. At a conference on the efficiency agenda last week, Oughton reiterated the message he had previously delivered to a full Cabinet meeting: that far too many shared service centres are being proposed. Government departments have generally signed up to the idea of sharing corporate functions, he said, 'but often want to retain the function and invite others to join them rather than look for another service provider they can join'. The business case can't work for all of them, he warned: 'Indeed, if all the proposals go through, more than 130 centres will be required that's more greenfield sites than Tescos.'

As the Gershon efficiency drive enters its much tougher second phase ahead of the 2007 Spending Review and a harsher fiscal climate the Treasury and OGC can be expected to come down harder on territorial objections to service sharing. As a National Audit Office report makes clear this week, even the £4.7bn efficiency savings claimed by the chancellor should be viewed as 'provisional'. Under Gershon Mark 2 the pressure is seriously on to make cashable back-office savings.

Not that this is news to most public sector managers. A recent survey by support service company Serco found that English local authority finance directors expect the second and third years covered by the Gershon review to be much more difficult. More than half say that they plan to implement a shared service strategy within the next year, particularly for informational and transactional services.

In Scotland, a majority of finance directors expect moves towards shared services and 'super-councils' to develop apace. However, there is still a long way to go before these statements of intent reach implementation stage. So why the delay?

The easy answer, says Deloitte partner John Binns, would be to make a direct comparison with the private sector, where 'a clear intellectual and economic case' for shared services has long been made. He has been working with Whitehall's shared services advisory group, alongside Oracle, Microsoft, Capgemini, Accenture and most of the major service provider players. The group reckons that government HR and finance services alone cost £9bn more each year than private and public 'best-in-class' benchmarks. Many commentators reckon that 20%30% staff costs could be shaved off the public sector's corporate services if managers were more willing to share.

But it's not that straightforward, says Binns. 'The lines of governance are much more complicated than in the private sector, where once the CEO or director makes a decision on shared services, it's shape up or ship out. Even in central government, where the permanent secretary is a very powerful person, there are many more questions about what they can order an agency chief to do.'

Not only are the accountability and parity issues much more complex, the levers that drive change in the private sector basically financial incentives and corporate success are a lot less obvious for public bodies, he says. 'That's why you need the Cabinet Office and the Audit Commission to corral everyone into line.'

So what are the issues to be addressed, if the joined-up 'T-government' utopia is ever to be attained? Top of the list has to be getting the technology right. If the buttons don't work for example, on the much-delayed NHS 'choose and book' system what hope is there for sharing electronic appointment services between health trusts? Many of Britain's 6 million public servants work with obsolete technology and IT 'legacy systems' that can't talk to each other. Meanwhile, hugely expensive computer failures across government have bred deep cynicism about e-government targets and joined-up working.

This presumably is the significance of Watmore's elevation from head of e-government to running the Delivery Unit: a deliberate signal that the PM is deeply serious about technology's role in transforming government. It also explains Myers' thinly veiled barbs, directed at public service IT suppliers, at a GovNet conference last week. 'The supply side needs to get its act together. Public sector shared service investments are delivering poor value compared with the private sector experience,' he said. Suppliers need to deliver more 'convergent solutions' and demonstrate greater capability, on time and at lower risk.

But alongside the technological challenges, there are the change management issues. Transformational Government talks about a 'major cultural shift' being needed to drive forward shared services, something increasingly evident in the NHS. Finlay Robertson, chief executive of the Lancashire Care NHS Trust, is on the front line of the ten-year NHS National Programme for IT, which aims to revolutionise the way patient data are stored, shared and used.

'Once we realised how inefficient we were, we knew that just adding on new IT wouldn't make it better. This is all about organisational change,' he says. His mental health trust seconded a pool of health professionals to champion new ways of working, tackle professional barriers and create trust between that 'loose federation of warring tribes known as the NHS'. This change model has been applied across the Northwest and West Midlands region, with some success. It has so far delivered the highest number of patient-record projects nationally.

These 'people' issues are huge, says Binns. The very real fear of shared services leading to job losses, relocation and offshoring of service centres (an option not ruled out by the Cabinet Office); lack of trust in prospective partners; loss of face and loss of autonomy as local 'empires' merge or shrink these are all challenges to be faced up to. 'People often have a rose-tinted view of the way things have been. And the number of staff you are in charge of is often seen as a bit of a virility symbol,' he says.

There is also the is-it-all-worth-it issue. Chris May, regional partnerships manager for the South-West Regional Assembly, says: 'A lot of elected members and officers are asking, what's the point of stripping out and sharing HR, finance or whatever, when the white paper and the Lyons review are going to shake everything up anyway? What will we have left?' It's a reasonable question, which applies equally to many PCTs and other bodies due to be legislated out of existence.

The high costs of negotiating collaborative arrangements were cited as the biggest barrier to sharing services by the finance directors surveyed by Serco. Given the vast start-up costs of shared service centres, and the minimum take-up levels needed to make them viable (more than 50% in the case of NHS joint ventures), it is no wonder that many public sector managers are cautious.

Local government expert Tony Travers says there is a big problem with Oughton's argument about unit costs and critical mass. 'If the OGC is saying that even some Whitehall departments are not big enough to share services, where does that leave the great swathes of local government that operate on a very small scale? And where does it leave the government policy of devolving decision-making down to a very local level, while simultaneously moving control over services away?' At the end of the day, it is still the individual authority that will be held accountable to the regulators and the electorate another reason they are reluctant to have their functions stripped away.

Ministers are not unaware of all these objections, and the political equivalent of counselling and a group hug has been brought into play. Through the regional centres of excellence, the Local Government Association, 4Ps, the Improvement and Development Agency and other 'change agents', hands are being held and heads banged together, to help transform service delivery.

But patience is fast running out. 'People can always think of excuses,' says Myers. 'They're too big, they're too small, they're too unique or they're good enough already.' The big stick is increasingly being wielded; by the Audit Commission, acting in loco parentis, and by the Treasury. Since April 2005, authorities have had to demonstrate through their Annual Efficiency Statement and the Comprehensive Performance Assessment that they are committed to partnership and collaborative working for their corporate and transactional services. As Transformational Government makes clear, there is a lot at stake. 'Bodies awarding funding should presume that public service organisations only deliver good value for money when they standardise and share services with others,' it states.

And if all that doesn't work? Private sector providers, who are champing at the bit to set up regional shared service centres, want some underwriting from government, and more incentives from the ODPM. There is growing talk of legislation to force councils into greater co-operation with each other and, privately by officials, of compulsion for government bodies that can't learn to share off their own bat. Every desperate parent stuck at a checkout till with screaming offspring will recognise the tell-tale signs. It's do as I say, not as I do. Why share? Because I say so.


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